Higher prices for diesel and petrol resulted in greater pressure on the Congress-led UPA government all of this week. Both the opposition and UPA allies of the Congress party demanded a reversal of the prices increases. But the government held its ground. On Tuesday, Prime Minister Manmohan Singh ruled out any rollbacks. And then on Thursday, Congress party president Sonia Gandhi defended the higher prices saying they were necessary for funding the government’s various social programmes. The increases in fuel prices came after finance minister Pranab Mukherjee announced new taxes on crude oil as well as on petrol and diesel during last Friday’s budget.
Prime Minister Manmohan Singh also defended his government’s handling of increases in food prices. On Friday he told Parliament poor monsoons and the global recession had put pressure on the prices of essential commodities. Singh said that if his government had responded to the price increases by tightening monetary and fiscal policy, it would have cause large-scale unemployment and harmed industrial production.
Despite the Prime Minister’s assurances, food prices are still not easing. India’s food price index rose 17.87% in the week ending 20 February compared to the same week last year.
The party’s over for cheap loans. On Thursday, some of India’s top lenders in the private sector hiked interest rates and withdrew special schemes. Among those that withdrew special home loans were ICICI Bank, Kotak Mahindra Bank and mortgage lender HDFC. Both ICICI Bank and HDFC have withdrawn loans that had an 8.25% teaser rate that was applicable for the first two years of a loan. New borrowers will now have to pay between 8.75 and 9.25% in interest.
Lenders have also hiked their rates for auto loans. ICICI Bank says it has raised its rates by 25-50 basis points, which put its new lending rate for auto loans at between 9.75 and 11%. HDFC Bank has also raised its auto loan rates by up to 100 basis points.
The ANZ Banking Group is finally set to re-enter the Indian market. On Thursday it revealed it had RBI approval to open a branch in the country. The license will allow ANZ to offer both wholesale and retail banking services in India, once its branch in Mumbai gets the green light. ANZ exited the Indian banking sector in 2000 when it sold its unit Grindlays Bank to Standard Chartered.
India’s exports have risen for a third straight month, going up 11.5% in January to $14.3 billion. Imports also rose, going up 35.5% to $24.7 billion.
India’s service’s industry grew at its fastest rate in more than a year in February. The Purchasing Managers’ Index for services rose 60.9 last month from 59 in January. Any number above 50 in the index indicates a gain.
Bankrupt petrochemicals company LyondellBasell rejected the latest bid from Reliance Industries Limited for a controlling stake. On Tuesday, the company’s board turned down a $14.5 billion bid from RIL. It had already rejected an earlier $13.5 billion RIL bid in January.